Trump wounds but can't kill Obama's Wall Street rules

President Donald Trump has made it his mission to undo as much of Barack Obama’s legacy as he can. But when it comes to dismantling his predecessor’s biggest legislative achievements, he’s 0-2 so far.

Trump tried and failed repeatedly last year to repeal Obamacare. Now, Obama’s landmark law regulating Wall Street is emerging largely intact from the gauntlet of a Republican-controlled Congress.

Story Continued Below

Congress is expected to send to Trump’s desk this week a bank deregulation bill rolling back several pieces of the 2010 Dodd-Frank Act, which imposed sweeping new rules on banks in the wake of the financial crisis.

But despite Trump’s promises to “do a big number” on Dodd-Frank, the bipartisan bill that is likely to be approved by the House as early as Tuesday leaves many of the Republicans’ most-hated provisions of the law in place, including the foundations of the Consumer Financial Protection Bureau and the government’s power to unwind failing megabanks.

"You take what you can get,” said Stephen Moore, an informal adviser to the administration. “If I can get half a loaf, I take that over no loaf at all. I don’t know if this would even be considered half a loaf, but it does make some reforms.”

The failure to overturn the two milestone laws underscores how much more lasting legislative victories are compared to executive orders and other actions the administration can take without Congress. Trump was able to decide on his own to pull out of the climate accord, the Iran deal and the Trans-Pacific Partnership. But he and Republicans in Congress have been repeatedly stymied on legislation with their small majority in the Senate.

“You can’t blame this on Trump,” Moore, a distinguished visiting fellow at The Heritage Foundation, said of Obamacare and Dodd-Frank. “He’s made some strategic errors, but it’s not like they didn’t try. It’s just they couldn’t get it done because of Congress.”

Political intelligence on Washington and Wall Street — weekday mornings, in your inbox.

Email

By signing up you agree to receive email newsletters or alerts from POLITICO. You can unsubscribe at any time.

Even if the banking bill falls well short of blowing up Dodd-Frank, that's unlikely to stop Trump from claiming victory. Though GOP efforts to repeal the Affordable Care Act failed, Trump has still declared that the health care law is “dead” and “essentially repealed.”

And House Speaker Paul Ryan, in the run-up to the banking bill’s passage, characterized the legislation as replacing Dodd-Frank — an approach that House Republicans tried last year without success when the Senate refused to take up their bill, which would have repealed significant parts of the law.

To be sure, the bill headed for Trump's signature is still a notable win for the administration, and it rolls back oversight of some of the country’s biggest banks. Thousands of small banks and credit unions will also escape numerous regulations imposed after the crisis.

The White House is framing it as a major accomplishment that in line with tax reform, regulatory rollbacks and judicial confirmations are part of an overlooked success story in Trump’s presidency. In the case of Obama's health care law, Republicans did deal a substantial blow by repealing the individual mandate, which will become effective next year, and the legislation could be further undermined this year at the agency level.

“We look forward to rolling back the onerous Dodd-Frank regulations on smaller community banks,” White House legislative affairs director Marc Short said.

But the victory falls more squarely with Senate Banking Chairman Mike Crapo (R-Idaho) and a group of moderate Democrats willing to break with their party to amend Dodd-Frank. The deregulation bill is the product of their years of negotiations, even while Obama was in office.

The core group of Democrats behind the bill included Sens. Heidi Heitkamp (D-N.D.), Jon Tester (D-Mont.) and Joe Donnelly (D-Ind.), who are all fighting for reelection in states Trump easily won in 2016. Sen. Mark Warner (D-Va.) was also at the negotiating table.

“There was give and take on all sides,” Tester said in an interview. “In the end, I give Mike Crapo the credit because he was able to find the sweet spot to be able to get the bill through. That’s how a negotiated process works.”

In the end, 16 Senate Democrats helped usher through the bill, setting off a now-resolved stalemate with the House, where Republicans wanted to take a much bigger bite out of financial regulation. With the banking industry and the White House eager for a victory, House GOP leaders relented earlier this month.

The bill would scale back key sections of Dodd-Frank. Regional banks scored a huge victory by lifting a regulatory threshold that subjects them to stricter oversight by the Federal Reserve. Small banks secured streamlined capital requirements and exemptions from mortgage-lending rules.

But most of the nation's biggest global banks — including Bank of America, Wells Fargo and Goldman Sachs — will get little from the legislation.

Rep. Blaine Luetkemeyer (R-Mo.), who is vying to be the next GOP chairman of the House Financial Services Committee, said Republicans’ attempts to do more were blocked by the Senate's 60-vote threshold to move most pieces of legislation. It’s a dynamic that’s unlikely to change any time soon as the Senate remains narrowly divided.

“Until we get to 60 votes, you can only do rifle shots that are very narrow in focus or something that’s going to be less major,” Luetkemeyer said.

Barney Frank, the former Financial Services Committee chairman who co-wrote the 2010 law, said the bill on the floor this week leaves most of his namesake legislation intact.

“The day that bill passes, that’s the end of any significant legislation on Dodd-Frank,” said Frank, who serves on the board of Signature Bank. “If the Democrats have the House, there will be no weakening whatsoever.”

Others in the party aren’t ready to declare victory.

“They get as much as they can in each step,” said Sherrod Brown (D-Ohio), who led the charge against the bill as the top Democrat on the Senate Banking Committee. “It could always be worse. We could have more Democrats saying it’s OK to weaken Dodd-Frank.”

Progressive Democrats and financial reform advocates, including Brown and Sen. Elizabeth Warren (D-Mass.), fiercely opposed the bill, citing worries that it would give Trump-appointed regulators more tools to hollow out post-crisis restrictions on Wall Street.

Watchdogs argue that even if much of the statute remains intact, Trump's appointees are already working to make life easier for the industry at the expense of consumers and the stability of the financial system. While the bill leaves the consumer bureau in place, for example, acting Director Mick Mulvaney is undertaking important changes using existing authority.

“A law like Dodd-Frank only comes to life and has meaning by what regulators, supervisors and prosecutors do or do not do,” said Better Markets President and CEO Dennis Kelleher, who advocates for tougher Wall Street regulation. “What we see in the regulatory arena is substantial broad-based deregulation and little, if any, enforcement.”

The bipartisan bill aims to reduce rules on some of the country’s biggest banks, but it leaves the substance of how that would happen largely to the Federal Reserve and its fellow regulators. That expands the already considerable freedom given to independent regulators under Dodd-Frank to work out the details.

After the bill is passed, banks and their allies in Congress will keep pushing to scale back the law. Some will try to build on the feel-good bipartisanship of the legislation heading to Trump’s desk this week.

Others, including Sen. Pat Toomey (R-Pa.), a potential contender for the Banking Committee chairmanship in the next Congress, have drawn up ways to circumvent obstruction by the minority party in the Senate to swiftly undo pillars of Dodd-Frank and its ensuing regulations.

Toomey has led an effort to find banking rules that can be rolled back using procedures that sidestep filibusters by Democrats. His most recent success was gutting 2013 CFPB auto-lending guidelines with support from just a single Senate Democrat.

"I don't think you should assume this is over,” Toomey said. “It's an ongoing process.”